Royal Mail stock market flotation set to go ahead

The process of selling off a majority stake in Royal Mail may begin on Thursday, BBC's Newsnight programme has learned.

In July Business Secretary Vince Cable announced the government's intention to privatise the postal service through a stock market flotation.

But a formal "intention to float" statement may now come before the stock markets open in London.

The plans have provoked strong opposition from unions.

The Communication Workers Union (CWU) is currently balloting members on strike action.

Ballot papers are due to go out on 20 September to 125,000 Royal Mail workers. The earliest possible strike date would be 10 October.

Plans to privatise the 250-year-old postal service have been on successive governments' agendas since the early 1990s.

'Right thing to do'

Plans already outlined by Mr Cable are set to allow members of the public to buy shares in Royal Mail, alongside larger institutional investors - 10% of shares will be set aside for Royal Mail employees.

The sale is likely to value the business at £2bn-£3bn, suggesting up to 150,000 staff will receive £200m-£300m in shares.

The government says the sale is necessary in order to give Royal Mail the access to private capital it needs to grow and remain competitive.

In a statement on Tuesday, a Department for Business spokesman said industrial action by the CWU, which represents the majority of Royal Mail workers, would not alter the government's decision to press ahead with the share sale.

"Parliament decided over two years ago that selling shares... was the right thing to do to secure Royal Mail's future and protect the six day a week, one price goes anywhere, universal postal service," he said.

Broad-based opposition

"A successful, financially sustainable Royal Mail with access to private capital is in the best interests of the workforce and all users of the universal service."

Speaking on BBC2's Newsnight, Nicola Smith, chief economist at the TUC, the trades union body, said there was broad-based support among trade unions and community groups for the campaign against privatisation.

She said union members were concerned about the future of the universal service and pricing under privatisation.

The TUC's secretary general Frances O'Grady described the privatisation plan as "stupid" during her keynote speak to the TUC Congress in Bournmouth earlier this week.

Royal Mail saw its annual profits double earlier this year after many years of losses.

It is currently undergoing a process of modernisation to focus more on parcel delivery, which has seen a boom as a result of the growth in internet shopping, and less on delivering letters.

Union leaders argue that the profitability of the business shows it can remain a viable concern within the public sector.

But the government argues that private investment is needed to continue that modernisation programme and compete with growing private postal service operators.

The flotation is likely to be one of the biggest since large utility companies such as British Gas were privatised in the 1980s.

It will not include the Post Office, which is a now a separate company.